Question

Using the ABC Retailers - Internal Controls Case, provide a summary of the case and the main points of the case(5 sentences)

Answer 1

This Case highlights issues with internal controls related to cash disbursements that could have an adverse impact on a company if not properly followed. ABC Retailers Inc. (ABC) is a public company and leading retail chain in the U.S. On June 1, 2018 the Accounts Payable manager received an e-mail inquiry from a vendor, Watch Makers, requesting to change their bank account information. TheAP manager responded by emailing the vendor a bank account request form and completing a separate Vendor Change Form for internal processing. ABC’s assistant controller reviewed and approved the request. After receiving an inquiry from Watch Makers regarding outstanding invoices, ABC determined that the previous bank account change request was received from a fraudulent domain. $2 million in payments were wired to the wrong account. ABC’s policy on bank account change requests was put into effect and communicated by the Assistant Controller indicating that certain steps had to be taken before a bank account change could take place. Being that the Assistant Controller distributed the policy and is also the control owner, there is a presumption that they would evaluate weather the AP manager obtained sufficient information to confirm the authenticity of the bank account change. During the planning of an audit, the engagement team obtained an understanding of internal controls related to cash disbursements and identified three risks of material misstatement relating to the cash disbursements process. As a result of the audit issue described, the engagement team identified a control deficiency